Wage Dispersion and Wage Dynamics Within and Across Firms

This paper examines wage dispersion and wage dynamics in a stock-flow matching economy with on-the-job search. Under stock-flow matching, job seekers immediately become fully informed about the stock of viable vacancies. If only one option is available, monopsony wages result. With more than one firm bidding, Bertrand wages arise. The initial and expected threat of competition determines the evolution of wages and thereby introduces a novel way of understanding wage differences among similar workers. The resulting wage distribution has an interior mode and prominent, well-behaved tails. The model also generates job-to-job transitions with both wage cuts and jumps.wage dispersion, wage dynamics, job search, stock-flow matching

A stock-flow matching approach to evaluation of public training program in a high unemployment environment

Monthly panel (1998-2003) data from regional labor offices in Latvia are used to analyze the matching process in a high unemployment – low labor demand environment and to evaluate the impact of active labor market policy programs on outflows from unemployment. Results suggest that the hiring process is driven by a stock-flow rather than by a traditional matching function: the stock of unemployed at the beginning of the month and flow of vacancies arriving during the month are the key determinants of outflows from unemployment to employment, while stock of vacancies and inflow of unemployed do not play any significant role. We find positive and significant effect of training programs on outflows from unemployment to employment, thus providing strong evidence against recent cuts in training expenditures.stock-flow matching, augmented matching function, labor market policy, training, transition countries

Testing theories of labour market matching

This paper estimates a model of two-sided search using micro-level data for a well-defined labour market. It examines the assumption of random matching and contrasts it with the stock-flow (or non-random) matching model of Coles and collaborators. Given a dataset of contacts, matches, and complete labour-market histories for both sides of the market, we estimate hazard functions for both (unemployed) job-seekers and vacancies. For job-seekers, the tests adds the stock of new vacancies to a standard job-seeker hazard which itself depends on the stocks of vacancies and unemployed. Our tentative results find very weak evidence of stock-flow matching.two-sided search, random matching, hazards

Wage dispersion and wage dynamics within and across firms

This paper examines wage dispersion and wage dynamics in a stock-flow matching economy with on-the-job search. Under stock-flow matching, job seekers immediately become fully informed about the stock of viable vacancies. If only one option is available, monopsony wages result. With more than one firm bidding, Bertrand wages arise. The initial and expected threat of competition determines the evolution of wages and thereby introduces a novel way of understanding wage differences among similar workers. The resulting wage distribution has an interior mode and prominent, well-behaved tails. The model also generates job-to-job transitions with both wage cuts and jumps.

An Empirical Analysis of the Matching Process in the Spanish Public Employment Agencies: The Vacancies

Our work tries to assess the degree to which the matching process of the vacancies managed by the Andalusian public employment agencies (SAE) approaches a theoretical model of the stock-flow type as described by Coles (1994, CEPR) and his collaborators. According to this model, a new vacancy can be "good" (relatively scarce in its labour segment) or "bad" (relatively abundant in its labour segment); this unobservable heterogeneity at the aggregate level determines the probability of coverage of the vacancy and the characteristics of the worker who occupies it. For our study, we work with a sample of 3.565 vacancies registered in the SAE between March 2006 and October 2008. The proposed test requires the estimation of a duration model for the hazard rate of vacancies with multiple exits. A novelty of our test is that it does not require information about the entire stock and flow of candidates of the other side of the market. The main result obtained is the existence of certain evidence in favour of stock-flow matching.Public employment agencies, Matching, Vacancies, Duration models, Stock-flow model.

Job Searchers, Job Matches and the Elasticity of Matching

This paper stresses the importance of a specification of the matching function in which the measure of job matches corresponds to the measure of job searchers. In many empirical studies on the matching function this requirement has not been fulfilled because it is difficult to find information about employed job searchers and job searchers from outside the labour market. In this paper, we specify and estimate matching functions where the flow corresponds to the correct stock. We use several approximations for the stock of non-unemployed job searchers. We find that the estimation results are sensitive to the approximation we use. Our main conclusion is that it is important to account for the behaviour of non-unemployed job searchers since otherwise the estimated parameters of the matching function may be seriously biased.unemployment;vacancies;matching

Random and stock-flow models of labour market matching - Swedish evidence

In this paper we estimate aggregate matching functions taking advantage of a rich data base that enables us to compute observations on the variables in the matching function at (virtually) any frequency to assess the importance of the time aggregation problem. We also generate stocks, outflows and inflows of vacancies and job seekers to shed light on the importance of stock-slow matching. Finally, we assess the contribution of labour market programme participants to matching. Our evidence rejects random matching. More precisely, we find that a non-trivial fraction of new job seekers match instantly (within the first week), that stocks of "old" vacancies and job seekers do not contribute significantly to matching and that the inflow of vacancies matches with the lagged stock of job seekers. Our results also suggest that labour market programme participants contribute to matching to a lesser extent than openly unemployed job seekers. We also find that the use of lagged stocks as right-hand side variables in matching functions (i.e., ignoring the within-period inflow of job seekers and vacancies) gives lower estimates of matching elasicities and that this is more pronounced the lower the measurement frequency.Stock flow matchíng; time aggregation

A Test Between Unemployment Theories Using Matching Data

This paper tests whether aggregate matching is consistent with unemployment being mainly due to search frictions or due to job queues. Using U.K. data and correcting for temporal aggregation bias, estimates of the random matching function are consistent with previous work in this field, but random matching is formally rejected by the data. The data instead support 'stock-flow' matching. Estimates find that around 40 per cent of newly unemployed workers match quickly - they are interpreted as being on the short-side of their skill markets. The remaining workers match slowly, their re-employment rates depending statistically on the inflow of new vacancies and not on the vacancy stock. Having failed to match with existing vacancies, these workers wait for the arrival of new job vacancies. The results have important policy implications, particularly with reference to the design of optimal unemployment insurance programs.Matching, Unemployment, Temporal aggregation

Looking Into the Black Box: A Survey of the Matching Function

We survey the microfoundations, empirical evidence and estimation issues underlying the aggregate matching function. Several microeconomic matching mechanisms have been suggested in the literature with some successes but none is generally accepted as superior to all others. Instead, an aggregate matching function with hires as a function of vacancies and unemployment has been successfully estimated for several countries. The Cobb-Douglas restrictions with constant returns to scale perform well. Recent work has utilized disaggregated data to go beyond aggregate estimates, with many refinements and suggestions for future research.Matching function, search, mismatch, Beveridge curve, co-ordination failure, stock-flow matching, ranking, on-the-job search, space aggregation, time aggregation